M/s. Manubhai Narottamdas & CO., Ahmedabad V. The Income Tax Officer, TDS-3, Ahmedabad

ITA 1110/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9386 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 01-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI
• Assessee Lawyers: M K PATEL
• Keywords: Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ./ ITA.NO.1110 AND 1111/AHD/2015 / ASSTT. YEAR: 2014-2015 M/S.MANUBHAI NAROTTAMDAS & CO. 202, PARISHRAM BUILDING MITHAKHALI, NAVRANGPURA AHMEDABAD. PAN : AHMM0 0724 D VS ITO, TDS-3 AHMEDABAD 380 014. ./ ITA.NO.1111/AHD/2015 / ASSTT. YEAR: 2014-2015 M/S.VINOD TEXTILES INDIA GINNING PRESS OPP: AMDUPURA PETRO PUMP NARODA, AHMEDABAD. PAN : AABFV 2697 P VS ITO, TDS-3 AHMEDABAD 380 014. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL AR REVENUE BY : SANTOSH KARNANI, SR.DR / DATE OF HEARING : 22/02/2016 / DATE OF PRONOUNCEMENT: /02/2016 $%/ O R D E R THESE TWO APPEALS OF THE ASSESSEE AROSE FROM TWO DI FFERENT ORDERS OF THE LD.CIT(A)-8, AHMEDABAD DATED 18.3.2015 IN ITA N O.1110/AHD/2015 AND DATED 19.3.2015 IN ITA NO.1111/AHD/2015 FOR THE ASS TT.YEAR 2014-15. SINCE ISSUE IN BOTH THE APPEALS IS IDENTICAL, THEREFORE, BOTH THE APPEALS ARE BEING TAKEN UP BY THIS CONSOLIDATED ORDER. 2. FIRST OF ALL, WE TAKE UP THE APPEAL IN THE CASE OF M/S.MANUBHAI NAROTTAMDAS & CO., IN ITA NO.1110/AHD/2015 FOR THE ASSTT.YEAR 2014-15 AND OUR ORDER HEREINBELOW SHALL BE IDENTICALLY APPL ICABLE IN ITA NO.1111/AHD/2014 IN THE CASE OF M/S.VINOD TEXTILES, AHMEDABAD. ITA NO.1110 AND 1111/AHD/2015 2 ITA NO.1110/AHD/2015 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL ARE AS UNDER: (1) THAT ON FACTS, AND IN LAW, THE LEARNED CIT (A ) HAS GRIEVOUSLY ERRED IN HOLDING THAT THE APPELLANT IS LIABLE FOR C OLLECTION OF TCS U/S 206C OF THE INCOME-TAX ACT,1961. (2) THAT ON FACTS, AND IN LAW, IT OUGHT TO HAVE BE EN HELD THAT THE APPELLANT'S BUSINESS IS NOT COVERED BY THE DEFINITI ON OF 'SCRAP', AS DEFINED IN SECTION 206C OF THE ACT, AND HENCE THE A PPELLANT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT WITHIN THE MEAN ING OF THE SAID SECTION. (3) THAT THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED I N LAW AND ON FACTS IN CONFIRMING THE ORDER OF ITO-TDS WHEREBY THE APPELLA NT IS TREATED IN DEFAULT U/S 206C AND DEMAND OF RS. 6,29,359/- IS RA ISED U/S 206C(6A), AND RS. 16,508/- IS RAISED U/S 206C(7), TOTALING TO RS. 6,45,867/-. (4) THAT THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN NOT GIVING ADEQUATE AND REASONABLE OPPORTUNITY TO THE APPELLANT TO FILE CERTIFICATES IN FORM NO.27C AND/OR FORM NO. 27 BA IN TERMS OF SECTION 20 6C, SUB-SECTIONS (1A) AND (6A) OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRADER IN COTTON, COTTON WASTE AND COTTON CHINDI . THE AO HAS NOTED THAT FOR THE SALE MADE TO TRADE RS IN RESPECT OF COTTON WASTE AND COTTON CHINDI , NO TAX WAS COLLECTED. THESE ITEMS ARE COVERED IN THE DEFINITION OF SCRAP BY V ERY NOMENCLATURE AND SO THE AO RAISED DEMAND FOR SHORT COLLATION OF TAX AND LEV IED INTEREST ON THE SAME. THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. 5. I HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE F ACTS OF THE CASE OF RECORD. THE LD.COUNSEL FOR THE ASSESSEE INVITED OU R ATTENTION TO THE PROVISIONS CONTAINED IN SECTION 206C OF THE ACT, WHERE IT IS P ROVIDED THAT EVERY PERSON, BEING A SELLER SHALL, AT THE TIME OF DEBITING OF AM OUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE BUYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE SAID ITA NO.1110 AND 1111/AHD/2015 3 BUYER IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT ETC. COLLECT FROM THE BUYER OF ANY GOODS, A SUM EQUAL TO 1% PER ENTAGE IN RESPEC T OF SCRAP AMONGST OTHER ITEMS MENTIONED IN THE ACT. HE FURTHER INVITED OUR ATTENTION TO THE EXPLANATION TO SECTION 206C(B) WHERE MEANING OF SCRAP HAS BE EN MENTIONED AS WASTE AND SCRAP FROM THE MANUFACTURE OR MECHAN ICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BE CAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. THEREFORE, THE ITEMS W HICH ARE SCRAP AND NOT DEFINITELY USABLE, AS SUCH ARE COVERED UNDER THE PR OVISIONS OF SECTION 260C. BUT IN THE PRESENT CASE, AS POINTED OUT AT PAGE NO. 34 TO 39, WHICH ARE THE CERTIFICATES OF THE BUYER, ONE OF WHICH IS REPRODUC ED HEREINBELOW FOR THE SAKE OF CONVENIENCE: AHMEDABD TEXILTE INDUSTRY RESEARCH ASSOCIATION P.O. AMBAWADI VISTAR, AHMEDABAD. TO WHOMSOEVER IT MAY CONCERN THIS IS TO CERTIFY THAT COTTON WASTE GENERATED FROM THE YEARN MANUFACTURING SPINNING UNIT THAT ARE SOFT WASTES NA MELY BLOW ROOM WASTE, CARDING WASTE, COMBER NOIL, STRIPPING, CYLIN DER FLY, CLEANER WASTE AND SWEEPING ARE EITHER SOLD TO GENERATE REVE NUES OR AS SUCH USED FOR MIXING WITH VIRGIN COTTON TO MANUFACTURE Y ARN. THESE WASTES ARE ALSO UTILIZED IN INDUSTRIES OTHER THAN TEXTILES , SUCH AS PAPER MANUFACTURING UNITS, MATTRESS AND QUILTING UNITS. FOR AHMEDABAD TEXTILE INDUSTRIES RESEARCH ASSOCIATION AHMEDABAD. SEAL 5.9.2013. 6. SIMILAR CERTIFICATES HAVE BEEN FILED FROM DIFFER ENT BUYERS AVAILABLE AT PAGE NOS.35 TO 39 OF THE PAPER BOOK. A PERUSAL OF SUCH CERTIFICATES, IT IS EVIDENT THAT SUCH MATERIAL IS USED AS SUCH FOR MIXI NG WITH VIRGIN COTTON TO ITA NO.1110 AND 1111/AHD/2015 4 MANUFACTURE YARN AND THESE WASTES ARE UTILISED FOR INDUSTRIES OTHER THAN TEXTILES, SUCH AS PAPER MANUFACTURING UNITS, MATTRE SS AND QUILTING UNITS. THEREFORE, IN THE CIRCUMSTANCES AND FACTS AND CIRCU MSTANCES, THE SCRAP IN THE PRESENT CASE IS AS SUCH USABLE, AND THEREFORE, CANN OT BE COVERED UNDER THE DEFINITION UNDER SECTION 206C OF THE ACT. OUR ATTE NTION WAS INVITED TO PAGE NO.82 TO 84, BEING THE DECISION OF THE HONBLE MADR AS HIGH COURT IN THE CASE OF CIT VS. M/S.ADISANKARA SPINNING MILLS PVT. LTD., WHERE QUESTION OF LAW HAS BEEN MENTIONED AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN DECIDING THAT COTTON WASTE CA NNOT BE CONSIDERED AS SCRAP WITHIN THE MEANING OF EXPLANATION TO SEC TION 206 OF THE IT ACT ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS RIGHT IN NOT CONSIDERING THAT THE ASSE SSEE NEITHER COLLECTED TCS NOR OBTAINED FORM 27C AS PER RULE 3 7C FROM THE BUYERS AND FORWARDED IT CCIT/CIT IN TIME FOR NON-CO LLECTION OF TAX AT SOURCE U/S. 206C(1A) OF THE I. T. ACT ? THE OBSERVATION OF THE HONBLE HIGH COURT AS EXTRAC TED FROM PAGE NO.84 OF THE PAPER BOOK IS IN FAVOUR OF THE ASSESSE E. 7. ACCORDINGLY, OUR VIEWS ARE SUPPORTED BY THE ABOV E DECISION OF HONBLE MADRAS HIGH COURT, AND THEREFORE, BY NO MEANS, THE SCRAP IN THE PRESENT CASE CANNOT BE SUBJECTED TO TAX UNDER SECTION 206C. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE AO IS NOT JUSTIFIED IN DEDUCTING T HE TDS UNDER SECTION 206C, AND IMPUGNED ORDER OF THE CIT(A) IS REVERSED, AND A LL THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 8. NOW WE TAKE UP THE APPEAL IN ITA NO.1111/AHD/201 5 WHERE THE FACTS OF THE CASE ARE IDENTICAL IN THE CASE OF ITA NO.111 0/AHD/2015 HEREINABOVE. ACCORDINGLY, OUR ORDER HEREINABOVE IN ITA NO.1110/A HD/2015 SHALL BE ITA NO.1110 AND 1111/AHD/2015 5 EQUALLY APPLICABLE IN ITA NO.1111/AHD/2015, AND ACC ORDINGLY, THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 23 RD FEBRUARY, 2016 AT AHMEDABAD. SD/- ( B.P. JAIN ) ACCOUNTANT MEMBER AHMEDABAD; DATED 23/02/2016